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- Cryptocurrencies, including bitcoin and smaller altcoins, may be overextended and in a bubble.
- But they can easily power higher anyways, a senior crypto analyst at Token Metrics says.
- Here are 12 altcoins, several of which are obscure and little known, that have upside.
- See more stories on Insider’s business page.
Cryptocurrency skeptics share some common ground with Forrest Przybysz, a self-described crypto evangelist who’s a senior cryptocurrency investment analyst at the analytics platform Token Metrics.
Both believe that bitcoin, and some smaller altcoins, appear to be in a bubble.
As history has shown, that doesn’t mean that the bubble won’t continue to expand far further. But Przybysz told Insider that a near-term pullback shouldn’t be written off by crypto bulls.
“The growth has been exponential,” Przybysz said. “Currently, we are in a bit of a bubble off of that trendline. We’re seeing even faster-than-exponential growth currently. Now occasionally, what happens is that these little bubbles or parabolic runups pop, and we come back down to the exponential growth trendline of total cryptocurrency market cap. We haven’t broken this trendline, or even really tested it, except for in the pandemic crash.”
Bitcoin (BTC), the original cryptocurrency, has been on a wild ride in 2021. It’s up 52% this year and has more than quadrupled in the past 12 months as individuals, corporations, and even governments increasingly embrace digital assets.
The so-called “digital gold” started the year on fire after Tesla announced it had added the digital asset to its balance sheet, and it gained more steam as investors viewed it as an inflation hedge. It then lost momentum over the summer and fell from over $64,000 to about $30,000 before retesting the key $50,000 mark and slipping back to the mid-$40,000s.
Bitcoin has sharply corrected this week, and Przybysz warned that more downside could be ahead. His charts show the digital asset is slightly overextended, and he calls levels over $35,000 “bubble territory.” A
bear market
could happen, as could a lengthy period of choppy trading.
But Przybysz said bitcoin could double or triple from current levels to $100,000 or $150,000 if regulators approve and legalize a bitcoin exchange-traded fund (ETF), which he said would draw in “dumb money” that could end up buying the asset as it peaks in a bearish “blow-off top” formation. Przybysz expects there a decision one way or another by the end of October.
“We are in kind of a make-or-break space right now for crypto, for the market,” Przybysz said.
It’s nearly impossible to time financial markets, and so investors should be aware that buying into “bubble territory” might cost them dearly if the music suddenly stops.
Key factors to follow going forward include the COVID-19 Delta variant, geopolitical unrest, and how soon the
Federal Reserve
starts tapering bond purchases, Przybysz said. Investors got insight into the Fed’s framework on Wednesday, when Chairman Jerome Powell hinted that the US central bank could take its foot off the monetary stimulus gas pedal sooner rather than later.
Ethereum is boring — but a strong bet
Besides bitcoin, crypto investors have poured their money into ether, the native token of the Ethereum blockchain. This network allows decentralized apps to be built on top of it, which can lay the groundwork for decentralized finance (DeFi) and countless other use cases.
Ethereum’s price action is relatively boring by crypto standards, and the advent of new flashy new competitors like Solana (SOL) and Cardano (ADA) has put ether under pressure.
Everyone loves to give up on ethereum when its price pulls back, Przybysz said, adding that it will “strike back” and take more market share. The main reason for his bull thesis is EIP-1559, a hard fork that drastically reduces the number of new ether tokens that come into circulation, which creates scarcity that should help lift prices unless demand falls.
The Ethereum network upgrade took place in early August but isn’t fully priced in yet, Przybysz said. He predicts ether could double and “conservatively” rise to $6,000 or $8,000, though for some hardcore crypto fanatics, a 100% gain from current levels is yawn-inducing. Ethereum traded near $3,072 early on Thursday.
Many young crypto speculators prefer betting on altcoins, which are, in some cases, the digital equivalents of lottery tickets. Smaller cryptos promise potential returns of tenfold or more, so they’re naturally “in a bit of a bigger bubble,” Przybysz said.
“If you just go and you gamble on altcoins, you’re probably not going to see 10x returns,” Przybysz said. “You might get lucky, but you’re probably not going to see 10x returns with any type of consistency. We have an investment research framework where we weed out all of the bad altcoins, or altcoins that we think will not show those types of returns, in an effort to increase our chances of investing in altcoins that will see those kinds of returns.”
Token Metrics’ investing framework focuses on each token’s use case, or designed purpose, and evaluates whether it can address an unsolved need, Przybysz said. Assuming the token innovates and provides value, it then must also provide a strong incentive for investors to hold it. Examples include profit-sharing from the project or governance rights.
Additionally, there must be good “supply-side tokenomics” for altcoins to succeed, Przybysz said. That means the supply in circulation must be sufficiently high and that the dilution rate isn’t too fast. Finally, investors should target projects with strong development teams and backers.
Three examples of relatively well-known altcoins that Przybysz said to avoid are Litecoin (LTC), Tron (TRX), and Ethereum Classic (ETC). He doesn’t think they’ll last despite past successes because they’re inferior to competitors, Przybysz said.
By contrast, Przybysz shared 12 altcoins he likes and has his eye on. Below are the names, along with the symbol, market capitalization, and a summarized use case for each.